How Affiliate Marketing Works

Demystifying Affiliate Marketing: How It Works

Affiliate marketing is an online revenue model where an individual earns a commission for promoting someone else’s products or services. It’s one of the most popular ways for bloggers, influencers, and content creators to monetize their online presence.

In this complete guide, we’ll cover everything you need to know to get started with affiliate marketing in 2023, including what it is, how it works, its benefits and challenges, step-by-step instructions to start, tips for success, and real-life examples.

The Ins and Outs of Affiliate Marketing

1. Join an affiliate programSign up to become an affiliate for a company’s products. You’ll get a unique affiliate link.
2. Promote affiliate productsShare your affiliate links on your website, social media, YouTube, etc. to drive traffic.
3. Lead makes a purchaseWhen someone clicks your link and buys something, you earn a commission.
4. Receive commissionThe affiliate program tracks sales and pays you your commission – often 5-30% of the purchase amount.
5. RepeatContinue promoting and earning commissions over time by providing value to your audience.

What is Affiliate Marketing?

Affiliate marketing is a performance-based marketing relationship between the merchant, the publisher, and the customer.

The merchant is the company or individual that sells a product or service. The publisher (or affiliate) advertises, promotes, and helps sell the merchant’s products in exchange for a commission on leads, sales, or other conversions. The customer is the end user who takes action and completes a purchase or other valuable action.

What is Affiliate Marketing?

What is affiliate marketing, and how does it work?

Affiliate marketing is a performance-based marketing relationship between the merchant, the publisher, and the customer.

The merchant is the company or individual that sells a product or service. The publisher (or affiliate) advertises, promotes, and helps sell the merchant’s products in exchange for a commission on leads, sales, or other conversions. The customer is the end user who takes action and completes a purchase or other valuable action.

Parties Involved in Affiliate Marketing

For affiliate marketing to be successful, it requires the action of different parties, which have specific roles within the process:


Affiliates create ads from their media to attract new customers for the company that hires their services. In exchange, they receive compensation, usually of a financial nature.


Advertisers look to affiliates to get more marketing for their brand, using less marketing effort. The advertiser makes the necessary tools available to the affiliate (free samples, discount coupons, etc.) to conduct a marketing campaign. They can be public figures, influencers, or other companies in a business alliance that benefits both organizations.

Affiliate platforms

Within affiliate marketing, this figure may or may not exist. They are intermediaries between advertisers and affiliates, who offer affiliate programs, infrastructure, and software where communication is generated, commission payment systems, and so on.


Suppose the advertiser and the affiliate well manage the marketing. In that case, the consumer receives a personalized recommendation and suggestions for using the product and provides a sense of status for its use.

How does affiliate marketing work?

If you have an e-commerce, affiliate marketing is an opportunity to generate income without investing time and money. The affiliate is responsible for delivering the message to its audience, and the advertiser, for its part, provides the means that will allow the affiliate to transmit the message, for which free samples, discount coupons, or gifts for potential customers can be used and, in some cases, for the affiliate.

 If the campaign is successful, the visitor will reach the website, and if the site is attractive and optimized, it is most likely that that user will convert. The conversion quality will determine customer loyalty to the brand and recommend it to people within their social circle.

They are the ones who create the ads from their media, intending to attract new customers for the company that hires their services. In exchange, they receive compensation, usually of a financial nature. Advertisers are usually public figures or influencers, but they can also be other companies in a business alliance that benefits both organizations.

Common affiliate programs

Some of the most common affiliate program compensation models include:

  • Pay-per-sale (PPS) – Affiliate earns a commission for every referred sale. For example, Amazon Associates offers 4-10% commission on each product bought through an affiliate link.
  • Pay-per-lead (PPL) – Affiliate earns a commission when a referred visitor completes a desired action, like filling out a form. Insurance companies often pay affiliates per generated lead.
  • Pay-per-click (PPC) – Affiliate earns commission when a referred visitor clicks on a link, banner, etc. Used heavily in display advertising.
  • Tiered/hybrid commissions – Affiliate commission rate increases as volumes increase, rewarding higher performers.

Some top affiliate platforms and networks include:

  • Amazon Associates – The largest affiliate program that offers up to 10% commission on products.
  • ShareASale – Offers 4000+ merchant affiliate programs across many verticals—average commission of 8.5%.
  • ClickBank – Focused on digital information products. Offers up to 75% commission on sales.
  • Rakuten – Provides affiliate links for over 2500 stores and offers percentages up to 40%.
  • CJ Affiliate – Full-service platform for advertisers and publishers to run successful affiliate campaigns.

Promoting Your Affiliate Links

Promoting your affiliate links is the essential step in the process. You can’t make money if no one knows about your product or service, so getting out there is essential to build an audience. There are several ways to do this:

Building an Audience: If you already have a large following on social media, then promoting your affiliate links will be easy because they already trust what you say. If not, try building up some credibility by creating helpful and informative content before promoting anything else (this might even lead to creating more specific content around one particular topic).

Creating Content: Create blog posts related to whatever products or services are being promoted through the link in question; this helps build trust with readers who may not know much about those items yet but could be interested in learning more about them later down the road after reading some reviews from other sources online.

Leveraging Social Media: Use social media platforms to promote your affiliate links and reach a broader audience.

Tracking Performance

You can measure your affiliate’s performance by tracking clicks and conversions and analyzing data.

  • Tracking Clicks: You can track the number of people who clicked on your affiliate link and visited their website. This will help you understand how many visitors are coming from each marketing channel and how effective each one is in traffic to your site.
  • Monitoring Conversions: You can also see if visitors convert into paying customers or leads by monitoring conversions on the affiliate’s website (e.g. if they sign up for a free trial). This allows you to determine which ads are generating more business than others so that you know where to spend more time promoting them in the future!

Optimizing Your Efforts

When starting, testing different strategies and approaches is essential. Try using keywords and promoting your site through social media. If one strategy isn’t working, tweak it until it does, and keep going. Monitor the competition and adopt successful strategies.

Making Money with Affiliate Marketing

As an affiliate marketer, you earn a commission by promoting a company’s products or services. The commission is usually a percentage of the customer’s purchase. Check the company’s affiliate program terms to find out the commission rate. Different affiliate marketing commissions have different types: pay-per-click, cost-per-lead, pay-per-lead, percentage rates, tiered rates, flat rates, and combined commissions.

Different types of affiliate marketing commissions

There are several types of affiliate marketing commissions, including pay-per-click (PPC), cost-per-lead (CPL) or pay-per-lead (PPL), percentage rates, tiered rates, flat rates, and combined commission.

Pay per Click (PPC)

  • Pay-per-click (PPC): the affiliate makes a profit each time a user enters the advertiser’s website.
  • Payment for Call Tracking: this method involves getting potential customers to register their phone numbers and requesting that the registration be made from the affiliate’s link.
  • Pay-per-sale: the payment is proportional to the advertiser’s conversion rate.
  • Pay-per-lead (CPL) or cost-per-lead (PPL): the affiliate is paid for each lead they bring to a website, even if the visitor doesn’t purchase the product. Most CPL offers require a certain percentage of people to buy for the affiliate to be paid.
  • Pay-per-share: ideal for businesses such as insurance sales. The affiliate gets potential customers to quote insurance at the insurer’s pricing, and for each step taken, the affiliate will receive a commission.
  • Percentage rates: the most common type of commission in affiliate marketing. Pays a set percentage of each sale or a percentage of the consumer’s total order.
  • Tiered rates: a bonus or increase in the commission given to affiliates who demonstrate the best performance.
  • Flat rates: a fixed bonus or increased commission to motivate potential affiliates to participate in an affiliate program.
  • Combined commissions: a combination of the other types of commissions, such as a combination of percentage rates and flat rates.

Why Affiliate Marketing?

There are several compelling benefits of affiliate marketing for both merchants and affiliates:

Benefits for Affiliates

  • Passive Income – Affiliates earn commissions on sales they refer without having to handle product fulfillment or customer service. Income can grow passively as traffic and conversions improve over time.
  • Low Barrier to Entry – Becoming an affiliate is easy and low-cost. No need to own a product, build complex funnels, or provide customer support.
  • Flexibility & Freedom – Affiliates can work independently anywhere with an internet connection. There are no fixed work hours or locations.
  • Unlimited Earning Potential – Successful affiliates can earn thousands to even millions of dollars monthly. Income scales up with traffic volume and conversion optimization skills.
  • Leverage Credibility – Affiliates can benefit from recommending products from reputable merchants with authority and trust.

Benefits for Merchants

  • Increased Sales – Merchants get incremental sales from new marketing channels and affiliates promoting to their audience.
  • Cost-Effective – Commission-based affiliate payments mean merchants only pay when sales are generated vs upfront ad payments.
  • Expanded Reach – Affiliates allow merchants to promote products to new audiences and markets via content, ads, email, social media etc.
  • Brand Awareness – Affiliate promotion helps strengthen brand visibility, credibility, and loyalty with target customers.
  • Market Insights – Merchants gain customer feedback and purchase behavior data from affiliates to improve products.

Challenges of Affiliate Marketing

While there are many advantages, both affiliates and merchants need to be aware of the potential challenges:

Challenges for Affiliates

  • High Competition – Profitable niches see a flood of affiliates competing for traffic. Standing out is difficult.
  • Saturation – Heavily promoted products see declining conversion rates and commissions over time. Maintaining profitability requires constantly finding new offers.
  • Trust & Reputation – Promoting too many different products from low-quality merchants can hurt your brand and audience’s trust.
  • Compliance Issues – Violating merchant terms or failing to follow FTC disclosure guidelines could lead to suspension or fines.
  • Payment Delays – Some merchants take 30-90 days to pay affiliate commissions. Cashflow management is crucial.

Challenges for Merchants

  • Vetting Affiliates – Screening dozens of affiliate applicants takes considerable time and effort to find quality partners.
  • Payment Processing – Tracking clicks, sales, and commissions and paying affiliates accurately involves technical integration and overhead.
  • Policy Management – Monitoring affiliate activities and enforcing program terms is labor intensive. Non-compliance could damage the brand’s reputation.
  • Data Security – Affiliate programs face an increased risk of data breaches, click fraud, and other cybercrime without proper precautions.
  • Customer Retention – Over-promotional affiliates may adopt aggressive tactics that long-term hurt customer experience and brand loyalty.

How to Succeed with Affiliate Marketing in 2023: Best Practices

While getting started with affiliate marketing is straightforward, standing out in a crowded industry and generating substantial income long-term takes some additional effort and smart strategies:

  • Provide Genuine Value – Content purely optimized to sell does poorly. Focus on delivering real value and solutions to your audience first.
  • Disclose Affiliate Relationships – Being transparent about your financial affiliations builds reader trust and complies with FTC rules.
  • Promote Selectively – Only promote products and services you recommend to friends or family to strengthen reader trust.
  • Diversify Income Streams – An over-reliance on one traffic source, offer or merchant is risky. Spread efforts across multiple channels.
  • Monitor Performance Continuously – Set up tracking to monitor channel results, optimize lower performers, and double down on what works.
  • Stay Updated – Affiliate marketing evolves fast. Continued learning about new tactics, tools, and trends is required to stay competitive.
  • Follow Program Guidelines – Carefully follow each affiliate program’s terms to avoid issues like sudden account suspension or withheld payments.
  • Keep Scaling Up – Consistently look for ways to expand traffic, improve conversions, and boost affiliate income over time.

Affiliate Marketing Success Stories

Thousands of individuals can generate full-time income from affiliate marketing across many niches. Here are some real-world examples:

Smart Passive Income (Pat Flynn)

  • Niche: Blogging, online business, and passive income
  • Key Affiliate Programs: Bluehost, Leadpages, ConvertKit, Teachable
  • Monthly Affiliate Earnings: ~$100,000+

Pat Flynn has built a thriving business sharing lessons and income strategies for online entrepreneurs. Affiliate earnings from related SaaS tools and training programs contribute ~50-75% of SPI’s revenues.

Making Sense of Cents (Michelle Schroeder)

  • Niche: Personal finance tips for millennials
  • Key Affiliate Programs: Chase, Discover, CapitalOne, YNAB, Personal Capital
  • Monthly Affiliate Earnings: $50,000+

Michelle earns most of her blogging income via credit card and personal finance-related affiliate programs. She also leverages her social media following.

Entrepreneurs on Fire (John Lee Dumas)

  • Niche: Business and entrepreneurship podcast
  • Key Affiliate Programs: Audible, Freshbooks, Teachable, ConvertKit
  • Monthly Affiliate Earnings: $40,000+

John monetizes his successful podcast through affiliate links mentioned in episodes and on his website. Software and online service affiliates perform well.

Adam Enfroy

  • Niche: Affiliate marketing and blogging tips
  • Key Affiliate Programs: Bluehost, SiteGround, StackPath, AWeber
  • Monthly Affiliate Earnings: $80,000+

Adam Enfroy has an engaged list of over 500,000 subscribers and specializes in recommending various software tools, web services, and training programs affiliated with his blogging courses.


What is affiliate marketing?

Affiliate marketing is a process where a company rewards an affiliate for each customer brought by their marketing efforts. The affiliate earns a commission for each sale they generate.

How does affiliate marketing work?

Affiliates promote a company’s products on their website, social media, or other channels. When a sale is made, the affiliate earns a commission. Affiliate tracking software provides purchase data and ensures proper commission payments.

What are the benefits of affiliate marketing?

Benefits of affiliate marketing include passive income potential, low startup costs, unlimited earning potential, leverage of other brands and products, and flexible work schedule.

What are some top affiliate programs?

Some top affiliate programs are Amazon Associates, ShareASale, ClickBank, Rakuten, CJ Affiliate, eBay Partner Network, and affiliate programs from companies like Webpilot, SEMrush, Awin, Impact, and more.

How much money can you make from affiliate marketing?

Affiliate income potential ranges widely from a few hundred to thousands of dollars per month based on factors like traffic volume, conversion rate, commission percentages, niche competitiveness, and marketing skills. Top affiliates easily earn over $100,000 per month.


Affiliate marketing remains a very popular and viable online business model for 2023 and beyond. It can offer financial benefits for both affiliates and merchant partners when done ethically and with value-focused content.

New beginners can get started relatively easy and low cost by choosing a profitable niche, signing up for relevant affiliate programs, creating a website, and following an audience-first content marketing approach.

Affiliate marketing does require significant effort to stand out and see success long-term. However, by providing genuine value to your audience and smart optimization of traffic, conversions, and income diversification, it is possible to generate full-time income through affiliate marketing.


The Federal Trade Commission (FTC) – “The FTC’s Endorsement Guides: What People Are Asking”: This document guides how businesses and affiliates should disclose their relationship when promoting products or services through affiliate marketing.


Hubspot – “What is Affiliate Marketing?”: This article provides a comprehensive overview of affiliate marketing, including how it works, the different types of affiliate programs, and tips for success.


Neil Patel – “The Ultimate Guide to Affiliate Marketing”: This in-depth guide covers everything from finding the right affiliate program to maximizing conversions and earning higher commissions.


Influencer marketing hub – “Top 8 Affiliate Marketing Strategies for 2023″: This article offers a beginner-friendly introduction to affiliate marketing, covering the basic concepts and strategies.

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